BUSINESS DEVELOPMENT - Product Versus Service Business

This past November, I joined 1st Light Energy as its Chief Operating Officer, and my wife and I relocated to Northern California. 1st Light Energy is a solar and conservation lighting business that installs solar arrays and highly efficient lighting on residential homes and commercial buildings.

Obviously, this was a time of major change for us, and I quickly came to realize that I was also going through an additional change. I was now going to run a service business for the first time after having led products businesses my entire career. I quickly began to see the differences in these two types of businesses as service businesses are very different from product businesses.

In a products business, you are selling tangible items over and over to your customers. Customers can come to you either in a brick and mortar store and walk out with the product in their hands, or they can go on the internet and have it delivered.

I found that in a service business, you are the product. And you are not just selling a service; you are selling trust and confidence in yourself and the service that you provide. The product in this case is also a promised result made by you to the customer, and the make or break in this situation is whether or not you deliver quality results in the timeframe specified.

This new business appeared to me as being much more personal in nature. I was used to selling a feature benefit set on a product or product line. In the service business, I was selling me and then the capability of our company. It is imperative that you gain your customers’ trust and convince them that you will deliver on your promise.

I also found that marketing is also quite different when comparing product to service businesses. Marketing in a product business centers around the 4 Ps of product, price, place, and promotion. In a service business, marketing centers around three additional Ps of people, process, and physical evidence. So you have to consider all 7 Ps in service business marketing.

There are two basic types of marketing, push and pull. Push marketing is pushing your products or services on to people. Pull marketing is attempting to draw people to your products or services. I believe that the service business is more of a push business. In 2012, before I joined 1st Light, the company had spent substantial marketing dollars on pull marketing. They advertised on radio, in print, and spent most of their marketing dollars on a huge direct mail campaign. They did not achieve what they had anticipated for their expenditure.

I realized, after joining the company that we really needed to spend our marketing dollars on a push marketing strategy. We hired a sales force that would go door to door and push the idea of solar energy and the tremendous cost savings it provided, not to mention its green energy capability. We also directly marketed to commercial building owners. The results are that we tripled our residential solar business in 1 year, and the commercial business is growing rapidly.

So there are distinct differences between product businesses and service businesses, and I am still learning. I am also learning that there are similarities between the two business types, but that is for another discussion.

John A. Bermingham is currently the COO of 1st Light Energy & Conservation Lighting. He was previously Co-President and COO of AgraTech, a biotech enterprise focused on chitosan, a biomaterial processed from crustacean shells (shrimp, crawfish,crab, etc), as well as President & CEO of Cord Crafts, LLC, a leading manufacturer and marketer of permanent botanicals. Prior to Cord Crafts, he was President & CEO of Alco Consumer Products, Inc., an importer of house ware, home goods, pet, and safety products under the Alco brand name and through licenses from the ASPCA and Red Cross. He successfully turned around the company in 60 days and sold Alco to a strategic buyer. Mr. Bermingham was previously the President & CEO of Lang Holdings, Inc. (an innovative leader in the social sentiment and home décor industries) and President, Chairman, and CEO of Ampad (a leading manufacturer and distributor of office products). With more than 20 years of turnaround experience, he also held the positions of Chairman, President, and CEO of Centis, Inc., Smith Corona Corporation, and Rolodex Corporation. He turned around several business units of AT&T Consumer Products Group and served as the EVP of the Electronics Group and President of the Magnetic Products Group, Sony Corporation of America. Mr. Bermingham served 3 years in the U.S. Army Signal Corps with responsibility for Top Secret Cryptographic Codes and Top Secret Nuclear Release Codes, earned his BA in Business Administration from Saint Leo University, and completed the Harvard University Graduate School of Business Advanced Management Program.